Providing Buyer with Deposit - Allowable Capital Expense?

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    Providing Buyer with Deposit - Allowable Capital Expense?

    Hi All,

    I have been wondering about this for a while:
    If you sell an investment property and pay the buyers deposit for them, is that deposit then a deductible CG item?
    eg. Sell property at £100K, buyer gets 75% mortgage and you provide the other £25K; can you then claim the £25K as a capital expense?

    Please lets not discuss feasibility from any other angles, I'm only interested in the tax treatment of that £25K expense to sell the property.

    Many thanks as always,

    Any thoughts anyone?!!!


      Surely you've actually sold it for £75k & assisted in a conspiracy to defraud mortgage lender.

      If so hope both buyer & seller are nicked/done.

      Not to mention CGT fiddle.

      I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...


        I don't think you need to claim 25K as capital expense. Your proceeds from sale is actually 75K.

        Your buyer may get nicked for fraud against the Mortgage company .


          I assume you are referring to Vendor Deposits/ Gifted Deposits - although the latter is a misnomer?

          If so, the jury seems to be still out on this one.


            Years ago, we had a thing round here where properties which were proving hard to shift, the seller paid the 5% deposit (an incentive to the buyer). It was all legal and openly done in all the estate agents. Don't know how it works with the tax man though.

            Also, lots of new builds, the building developers often provide the deposit. Again, no idea how it would work in respect of tax.


              Thanks all

              King_maker - Gifted deposit is the term that sounds familiar

              Claymore - Thats exactly what made me think of it, years ago before I got into property I was offered flats somewhere outside of London (maybe Bristol) in an arrangement where I wouldnt have to pay a penny and would actually get paid around 10k per flat I agreed to buy on a high LTV mortgage.
              I didnt pursue it as I wasnt happy with the valuations but there was never the suggestion that it was illegal in any way.

              Anyway its clearly an interesting topic to discuss (hi artful!) assuming its legal it has to be either an allowable expense or as Gordon put it 'proceeds from sale' are declared at the adjusted figure.


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